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Is Medicaid That Hard To Understand?

medicaid-logoYou hear that funny whirling noise? That’s your head spinning from trying to figure out the Medicaid rules and regulations. The manual is as thick as the New York City phone book! It’s confusing, even for an educated person like you. And you know what? It doesn’t have to be that difficult.

After taking a deep breath and a short break, let’s take another look at Medicaid. It’s comprised of rules…a lot of rules. There are exceptions to the rules, and exceptions to the exceptions to the rules, etc… And that’s where it gets confusing.

Here’s something that might ease your mind and the headache you have: you don’t go through this alone! There are professionals out there who know the ins and outs of Medicaid and can assist the application process and make it go very smoothly for you and your family.

Medicaid is a joint federal and state health insurance program for individuals and families with low income and resources. It’s been that way since 1965, when it was created. It is jointly funded by the state and federal governments, and is managed by each state, which is a fact most people overlook or are not aware of. However, the federal government provides guidelines for states to follow.

Think of Medicaid as a big engine, and the long-term care (that’s the fancy term for nursing home coverage) component just one piston that’s needed in the overall operating scheme. You may not be aware of this but Medicaid is the largest source of funding for medical and health-related services for people with low income in the U.S. In addition to that, Medicaid also helps low-income adults and their children, and people with certain disabilities.

There are four simple principles to keep in mind when dealing with Medicaid: understanding the rules; determining if you meet eligibility requirements; determining the spend down method; and implementing the funding plan.

What would life be like without rules? We need rules in life to govern everything, and Medicaid is no different. These are factors that are used to see if a person is eligible for Medicaid. Where it may get confusing for the layperson is in some of the jargon used. What is an institutional spouse, and who is the community spouse? What’s the Five-Year Look-Back? The rules and the language used in the application process can be explained to you by a professional. Once you have a clear understanding of the application of the rules regarding these key terms, it will determine whether an individual is Medicaid eligible. Trust me, after these terms are explained to you, it will be like a light bulb going off.

Eligibility is a huge factor when it comes to qualifying for Medicaid. You don’t expect to see Donald Trump or Warren Buffett on Medicaid, but what about your elderly next-door neighbor who just lives on his Social Security and pension checks? The second rule determines whether a person meets qualifying conditions. Does he or she need care that is covered by Medicaid, and does he meet the income and asset limitations? That last part is a biggie. Remember, the most a person can keep when applying for Medicaid is $2,000. Just because a husband has $50,000 or more in assets, don’t think he can’t get his wife qualified for Medicaid. Financial and estate planners can advise you on ways to properly protect your money instead of spending it down.

Which leads us to the third principle: the spend down. Twenty years ago, your old neighbor Mr. Jones was told he had to spend down his life savings to qualify for Medicaid. And you know what? He did exactly that, wrote $150,000 in checks to the nursing home to get qualified for Medicaid. That doesn’t have to be the case now. There are such features known as qualified spend downs that will not penalize the Medicaid applicant. Examples: making improvements on the residence (especially if it’s a married couple and one spouse is staying at home), purchasing a car or paying off debts.

That said, an improper transfer could result in a penalty. What is considered an improper transfer? A monetary gift to a family member to help pay off his mortgage (the $25 you send to the grandson for his birthday every year is allowable), a $10,000 contribution to your church’s building fund or local organization’s fund-raising campaign. These little gestures are considered improper by the state, and using various formulas will disqualify you from receiving Medicaid for an undetermined amount of time.

There are methods that can be employed to safely spend down your money. It might include the purchase of prepaid funeral trusts (a big tool when it comes to Medicaid qualifying), or establishing a trust or personal services contract to compensate your sister or nephew who takes care of you. A combination of these spend down methods may be utilized in qualifying a client. An elder law attorney and financial and estate planners can tell you more about these pitfalls.

Finally, once you have applied the rules, utilized the exemptions and completed your spend down strategy, none of it is effective without a funding plan. Unlike traditional estate planning where funding could get “cleaned up” after death by a pour over will, in Medicaid planning, none of the penalties or planning is effective until the funding has been completed. It is absolutely critical that you have a complete funding strategy in place once you create the plan to ensure the plan you create is actually going to work.

Do you feel a little better after reading this? Is the throbbing receding from your temples just a bit? Thought so. You probably still have questions, and that’s expected. It can’t be stressed enough to contact a local elder law attorney or certified financial and estate planners to help assist you with the Medicaid process.